First time buyer prices rise as home ownership remains out of reach for many

Published 20/06/2013

First time buyers are facing an increasingly uphill struggle to get on to the housing ladder, according to new a report commissioned by Shelter, the housing and homeless charity.

The study looked at earnings, house prices, rents, and spending on essentials in different areas across the country. It found that couples without a child face an average of six and a half years of saving, and almost double that time in London (11 years).

House prices

This follows new house price figures from the Office of National Statistics which showed that prices paid by first-time buyers in April this year were 4.7% higher on average than in April 2012. This compares to an increase of 1.9% for existing owners over the same period.

These figures are the latest (alongside RICS’ recent survey) to show a steady improvement in the housing market during the first half of 2013, particularly in demand for first time buyer homes since the Government launched its Help to Buy scheme in March.

Although these signs of recovery are good news, the main result in the short-term seems to be an increase in property prices as demand for homes outstrips supply.

There are fears that prices will just continue to rise if the demand is not met with more new homes in the longer-term and the Government and housebuilders need to address this if the Help to Buy scheme is to be labelled a success in terms of making home ownership a viable option for a lot more people.

Mortgages rates

While the Shelter report focuses on the difficulties of getting a big enough deposit, getting a mortgage – something that was seen as the major hurdle to buying in the aftermath of the credit crunch – is now not such a tough ask for many borrowers.

With growing choice and falling interest rates, mortgages are more attainable and affordable than they were five years ago. A new report this week from Halifax said that mortgage payments as a proportion of income have fallen by more than two-fifths in the UK in recent years, from a peak of 48% in Q3 2007 to 28% in Q4 2012.

Of course, the best mortgage rates on offer are for those with the biggest deposit to put down – a double-blow for those only able to put down 5% or 10%. However, the main issue for many is simply being able to borrow enough to afford a home with the deposit they have.

While lenders can certainly help by ensuring a good supply of mortgages to first time buyers, they have to make sure that every mortgage they lend is affordable, based on each borrowers circumstances. They can’t just lend more because houses are more expensive and there's no sign of them relaxing affordability criteria any time soon.

The result of all this, according to a new survey from Halifax, is that 36% of 20-45 year olds said they would like to buy a home but don’t think they will ever be able to. It's these people, part of what Shelter calls 'generation rent', that the charity is looking to shine a spotlight on in its latest campaign.

Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.

We're here to offer our customers excellent fee free mortgage advice. Our expert advisers will help you secure the best mortgage deal whether you're a first time buyer, remortgaging your home, buying to let or moving up the property ladder. We'll help you throughout the mortgage process – no hidden costs or surprises, just straightforward, honest, mortgage advice.

Representative example A mortgage of £190,596 payable over 22 years, initially on a fixed rate until 30/04/23 at 1.65% and then on a variable rate of 4.90% for the remaining 17 years would require 63 payments of £860.92 and 201 payments of £1102.66. The total amount payable would be £277,868 made up of the loan amount plus interest (£85,277) and fees (£1,995). The overall cost for comparison is 3.6% APRC representative.

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